INNOVATIVE ENTREPRENEURSHIP AND BASIC FUNDRAISING CONCEPTS€¦ · INNOVATIVE ENTREPRENEURSHIP AND...

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INNOVATIVE ENTREPRENEURSHIP AND BASIC FUNDRAISING CONCEPTS

Fundraising Education and Pitch training Seminar

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“I HAVE AN IDEA!”Shall we get some money for it?

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Ideas worth investing in

Innovate for a new

Improve the existing

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Funding in Latvia

• Innovative Growth Companies

• Conventional Life-style businesses

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What is innovation?

• The process of translating an idea or invention into a good or service that creates value or for which customers will pay

• New ideas, new methods, new scientific and technological products or services

• Developed on the cross-section of branches, experiences, industries or professions

• Application of scientific method

• Invention Innovation Diffusion

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Improvements of existing:

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Innovations in Baltic states

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I HAVE AN IDEA...

• Do NOT test your ideas with your own money!!! Test your ideas with your Bose’s money!

• Prepare for start-up

• “Buy low, sell high, collect early and pay late..”

Dick Levin

Associate Dean

School of Business Administration

University of North Carolina

Systematic approach:1. R&D, Technology, IP (idea)2. Supply3. Production4. Sales, marketing5. Administration, HRM

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Start-up environment: culture & components

• It takes guts!!! + time, energy, hard work and money...

• Mission orientation, persistency – “I have to get it done!”

• Culture of risk-acceptance: most of the start-ups fail!

• Venture capital, BAN’s and innovation community

• State support system (LIDA, LGA), legislation (tax relief, crowd-funding)

• Basic business education along with professional knowledge

• Specialized training Process

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FUNDRAISING CONCEPTS

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Why companies need outside funding?

• Global competition, global (open?) markets

• Technology advances VERY fast

• Individual players vs. Business eco-systems

• Individual Competences, business acceleration, market entries - could be bought by money!!!

From start-up IPO

1976 1982From start-up IPO

2004 2012

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Funding escalator

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Funding Escalator

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Startup Funding Escalator

andCorporate Growth

Strategy

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INVESTORS vs COMPANIES

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Investors

Industrial Investors vs Financial Investors

• Company in the same business branch looking for:

Markets

Customers

Cost reduction factors

New Technologies

Business Angels, “Smart money”

Long term private fin investors

Family offices (“oligarch money”)

Corporate Ventures

Risk Capital Funds (PSF, SF, VC)

Mezzanine Funds, Buy-out-Funds

Private Equity Funds, Hedge Funds

Their business expansion vs Your business expansion

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Financial Investors mind-set

• Buy low, sell high, earn on the margin

• Strong business opportunity

• How To reduce the risk

• Team, team, team

• Focus, focus, focus

• High quality deal-flow: investor-ready companies

• Syndicate investments, networking with other investors

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Investment Process

Innledende

diskusjoner

Initial contact Term Sheet Due DiligenceNegotiations

on documen-

tation

Initial

discussions

Investor

approval 2

Investor

approval 1

Investor

”go ahead”

General review of:

– The company

– Business plan

– Financial statements

/ budget

– Discussions with

management

Main terms and

conditions of the

investment

– Legal

– Technical

– Environment

– Market

– Transactions

Agreement

– Shareholders

Agreement

– Loan Agreement

– Employment

agreements

Closing

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Why Exit?

• Investors want to collect return

• Funds are sold and closed down

• Entrepreneurs cash in

• Entrepreneurs love the art of the start

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Exit Routes for Financial Investor

• Secondary Buy Out (SBO) – according to Corporate Growth Strategy

• Trade Sale (to Strategic Investor)• M&A

• Management Buy Out (MBO)

• Buy out fund

• Initial Public Offering (IPO) • Secondary markets

• Full listing

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INVESTMENT CONCEPTS

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Companies

Businesses by Growth Potential

• Life-stile businesses

• Gradual Growth companies

• Fast Growth Companies (Growth Companies)

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Life-stile businesses

• Restaurants

• Small shops

• Creative industries

• Family-owned companies

• Franchises (for sale...)

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Life-stile businesses

• Set up and run by the Founders (families)

• Limited scalability

• Limited growth possibility beyond certain income level

• Limited access to out-side funding

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Life-stile businesses

• Financing:

• FFF (founders, friends and family);

• Soft money (grants, state & municipal programs)• “Altum”: SME & start-up lending

• LIDA, Business Incubators, Incubation grants

• Int. Grants (Horizont 2020, Interreg, EU Soc. Fund)

• Bank Loans (pers. Guar.+ collat.+ proven record)

• Long term private investors?

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Gradual Growth companies

• Traditional Production and Services companies

• Transportation companies

• Agricultural companies

• Companies with • Geographical

• Political

• Administrative

• Traditional

• ...limits for growth

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Life-stile businesses

• Gradual growth perspectives

• Access to out-side funding based on proved earnings history

• Mortgage and/or collateral required

• Modest valuations

• Interest from Industrial Investors (with disturbing business agenda)

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Gradual Growth companies

• Financing:

• FFF (founders, friends and family);

• Soft money (grants, state & municipal programs)• HIPO Bank (LV state): “Altum” program, start-up lending

• LIAA, Business Incubators (LV state): Incubation grants

• Int. Grants (EU 7th Framework, Interreg, EU Soc. Fund)

• Bank Loans (pers. Guar.+ collat.+ proven record)

• Long term private investors

• Long Term Industrial Investors

• Mezzanine Funds (after proven income history)

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Growth Companies

• Innovative products and services

• Technology companies or technologically advanced companies

• Traditional companies with global cross-border growth ambitions

• Scalable business concepts with highly profitable re-investment opportunities

• Disturbing technologies and services

• Strong management teams

• Serial entrepreneurs

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Growth Companies

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• Funding:

• All the previous funding sources...

• Access to International Capital Markets:• Intentional Angel Investors

• Int. Seed and Venture Capital Funds

• Intern. Business Accelerators and

• Business Education programs (Seed Forum)

• Multiple exit possibilities

• Listing possibilities at later stage of development

Growth Companies

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INVESTMENT CONCEPTS

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Serial Entrepreneurs

- Venture Capitalists and Business Angels love Serial Entrepreneurs

- Serial Entrepreneurs understand the corporate growth strategy and investment process and could professionally exercise it

- Serial Entrepreneurs usually become Private Financial Investors

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“Hockey Stick” for Risk Investors

“Hockey stick” – a time for Risk Investors:

- Private Financial Investors

- Venture Capital Funds

- Seed Capital Funds

- Growth Funds

- Mezzanine Funds

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Startups - Born globals

• Risk capital financing is the new trend in internationalization

• Start-ups go international much earlier than before

”THE WORLD IS THE HOME MARKET"

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Gints Vīns

+371 295 77777

Gints.Vins@gmail.com